Recently, you have probably heard a lot about the One Big Beautiful Bill Act (OBBBA). How does the passage of this new law affect your estate plan?
Current Law
As of January 1, 2025, the lifetime federal estate and gift tax exemption is $13.99 million per person. This means, if everything someone gives away, both during life and after death, adds up to less than $13.99 million, that person won’t owe any federal estate tax on those transfers. Married couples can give away double that amount without being taxed because each spouse gets their own individual exemption. Any and all amounts exceeding the exemption will be taxed.
The 2025 exemption amount was put into law by the Tax Cuts and Jobs Act of 2017, but that law was temporary. Prior to the passage of OBBBA, the exemption was scheduled to decrease on January 1, 2026 to roughly $7 million.
The OBBBA Changes
With the enactment of OBBBA, the scheduled reduction will no longer take place. Instead, effective January 1, 2026, the federal estate and gift tax exemption will increase to $15 million per individual, and it will be indexed to inflation annually. For married couples, this means a combined exemption of $30 million.
Importantly, this change is permanent, providing long-term certainty for individuals planning their estates. The tax rate on transfers exceeding the exemption will remain at 40%.
Conclusion
The permanent increase in the estate and gift tax exemption allows individuals and families to preserve more wealth across generations. With higher thresholds in place and future increases tied to inflation, now may be the time to revisit your estate plan and gifting strategies. At Nickerson Law Group, we’re here to help you understand how these changes could impact your goals, and to ensure your plan reflects the new legal landscape.
